British tech firm agrees Chinese takeover deal

It’s perfectly possible that you missed the news, as it trickled out late on Friday night when most people were digesting Theresa May’s speech in Florence or the shock decision by Transport for London to take away Uber’s operation licence, but another British technology company has just agreed to a foreign takeover.

This time, it is Imagination Technologies, the chip designer best known for the Pure digital radio business that it owned until just under a year ago.

It has agreed to a £550m takeover by Canyon Bridge Capital Partners, a Chinese investment firm, which only last week was barred by President Trump from buying an American chipmaker on national security grounds.
Yet it is highly unlikely that the takeover will be barred in this country and not just because the UK is rather less paranoid about Chinese investment than Mr Trump appears to be.
It is because this Chinese takeover possibly represents the best chance of survival for Imagination, which is based at King’s Langley in Hertfordshire and which at its peak had 1,200 employees.
For this is a business that has been laid low – by Apple.
The world’s biggest company was once Imagination’s largest customer, accounting for half of its annual revenues. The British company had designed graphic chips for the iPhone ever since the product was launched a decade ago.
However, in April, Apple suddenly announced that, between the next 15 months to two years, it would no longer be using Imagination’s intellectual property and that the company would therefore no longer be entitled to any royalty payments from it. It said that it would instead be using its own graphic design technology.
The announcement sparked a collapse in Imagination’s shares that wiped out two-thirds of their value.
That was only the start. It subsequently emerged Apple had poached 25 employees from Imagination during the previous two years, including its former chief operating officer, a senior designer, its vice president of hardware engineering and a graphics modelling engineer.
To add insult to injury, July saw Apple announce that it was renting a 22,500 square foot office in St Albans, just down the road from Imagination’s headquarters. The expectation is that it will try to poach more of Imagination’s employees.

Image: Apple’s new iPhone X uses the US tech giant’s own graphics processing units
Apple has always maintained that it gave Imagination fair warning that it planned to wind down its relationship and that it would be producing its own graphics processing units. These were showcased at the recent launch of the new iPhone X.
It has said Imagination’s response to its behaviour has been “inaccurate and misleading”.
Yet few will disagree with Andrew Heath, Imagination’s chief executive, when he says Apple’s behaviour has been unethical and “not acceptable business practice”.
This has been a distressing episode in the life of a stalwart of the British technology scene and which began life 32 years ago under the name VideoLogic.
And it has again raised the suspicion that Silicon Valley’s giant tech companies, which love to portray themselves as happy-clappy businesses devoted to their customers, have a nasty and anti-competitive side to them.
By contrast, Canton Bridge appears to be trying to do its best by the British company. Imagination’s leading shareholders and the UK government were briefed of its plans ahead of the announcement.
To avoid any concerns on the part of the White House, in a separate deal today, Imagination’s US micro-processing division has been sold to a US investor.
And Ray Bingham, partner at Canyon Bridge, has made this pledge: “With our backing and investment, Imagination can continue to invest in developing its technology, attract and hire the best engineers and acquire and service customers globally.
“We are investing in UK talent and expertise in order to accelerate the expansion of Imagination, particularly into Asia, where its technology platform will lead the continued globalisation of British-developed innovation.”
Anyone who has witnessed Imagination’s torment during the last six months will wish him, Mr Heath and their colleagues well.